SEBI’s strict stand in IPO clearance; Returns draft paper of 6 companies

These companies have been asked to re-file their Draft Red Herring Prospectus (DRHP) with certain updates.

except oyoThe firms whose draft papers have been returned by the regulator are Go Digit General Insurance Ltd, a firm backed by Canada-based Fairfax Group; domestic mobile maker Lava International; Paymate India, a B2B payments and services provider; Fincare Small Finance Bank India and BVG India, an integrated services company, according to an analysis of SEBI data.

Six companies filed their initial public offerings (IPO) papers with SEBI between September 2021 and May 2022 and their papers returned during January-March (by March 10).

Together, these companies were expected to raise at least 12,500 crores.

SEBI has become stricter in its approach to go ahead with IPOs after investors lost money in some high-profile initial shares in 2021 and the average time taken by the market regulator to clear IPOs in 2022, according to data compiled by Primedatabase.com. It took 115 days to give approval.

“Following the IPO debacle following the listing of new-age digital companies like Paytm, Zomato and Nykaa, in which investors suffered huge losses, SEBI has tightened the approval norms for IPOs. This is welcome and in the interest of investors is in,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

However, ultimately investors will have to use their heads while applying for IPOs and avoid high priced issues, he said.

One97 Communications, the parent unit of digital payments firm Paytm, made a disappointing debut in November 2021 on the exchanges. 18,300 crore IPO was the biggest on Dalal Street after Coal India. The stock of the digital payments firm was still trading 72 per cent lower than its issue price.

Prakhar Pandey, founder and CEO of Moolah, believes that SEBI’s recent move sends a strong message to merchant bankers that they must fully comply with the set of information required for submission of the draft prospectus and all important information required disclose, rather than the exhaustive back and forth between bankers, firms involved with the IPO, and regulators.

Earlier, SEBI continued to give a grace period to most firms to file their complete set of compliance documents, which led to a higher gestation period of four months compared to last year. He said that this could lead to a big mess in terms of the IPO price band.

So far this year, only nine companies have approached SEBI with their draft IPO documents amid extremely volatile market conditions and volatile investor sentiments.

In addition, only two companies – Divgi Torqtransfer Systems and Global Surfaces – have issued their initial shares to drive sales. 730 crores since the beginning of the year, while Udayashivkumar’s 66 crore IPO is going to open next week.

This comes after 38 companies collectively came close 59,000 crore through IPO in 2022, which was much less than 63 companies raised Rs 1.2 lakh crore in 2021, which was the year of IPOs in a decade.

The total collection in 2022 would have been much less had it not been there 20,557 crore-LIC Public Offer, which was 35 per cent of the total amount raised during the year.

Investors remained nervous till 2022 due to fears of recession amid rising inflation and rising interest rates.

Experts believe that some activity on the IPO front can be seen only in the second half of FY 2023-24.

“Several factors such as rising interest rates, a global banking crisis, FPI outflows, slow economic growth, subdued inflation, and some governance issues in large corporations with low earnings and high valuation multiples are factors for the market correction.

“These challenges, once fully addressed, is when we may see private companies hitting the public markets, probably in the second half of FY24, and the current IPO applications at SEBI to derail these pessimistic market sentiments Want to wait for this period,” Pandey said.

Geojit’s Vijayakumar said given the volatility in the market right now, only well-priced companies that are attractively priced will get a good response from investors.

The text of this story is published from a wire agency feed without any modification.